COVER STORY, MARCH/APRIL 2010

You have to spend money to make money. The old adage is true everywhere in commercial real estate — especially when it comes to attracting businesses that will spend money on development and create jobs. But economic development budgets have been decreased in recent years, just like budgets everywhere. Northeast Real Estate Business talked with representatives from economic development organizations in Greater Philadelphia; Manchester, New Hampshire; and Warwick, Rhode Island, to find out how economic development has fared in these cities during the economic downturn.

“The [down] economy really affects the marketing budget, limiting everything from tradeshows to print collateral,” say Bryan Evans, director of public relations, and Jim Shannon, chief marketing officer, of Select Greater Philadelphia.

“We’ve pulled back from our broad message and we are more specifically targeting industries that would do well here,” Shannon says.

The Manchester Economic Development Office (MEDO) has also shifted its focus during the economic downturn to a more scaled-back and targeted approach for bringing in new business and retaining existing businesses.

According to Chris Wellington, marketing and retention specialist with MEDO, “One of our major strategies has been to better market the city’s tax-friendly environment and business incentive programs that encourage economic development. Over the past year, our office has seen a large increase in the number of businesses that have contacted us looking to take advantage of our businesses incentives.”

Manchester, New Hampshire

Wellington notes that the two incentives that most commonly drive commercial real estate investment in Manchester are the Community Revitalization Tax Relief Incentive Program (referred to as 79-E) and the Economic Revitalization Zone Tax Credits Program (formerly CROP Zone).

The 144,000-square-foot Pandora Building is located in the historic mill yard in Manchester, New Hampshire.

79-E encourages reinvestment in existing buildings within the downtown area by allowing qualifying property owners to avoid taxes on the value of improvements made to their properties for a certain number of years. To qualify, properties must be located within the designated downtown area, the value of the rehabilitation must equal to at least 15 percent of a building's pre-rehab assessed value or $75,000 (whichever is less), and must be consistent with Manchester's master plan and development regulations. This program is currently in the process of being rewritten, and a revised version is expected to be approved in the coming months.

Through the Economic Revitalization Zone Tax Credits Program, new and expanding businesses within the areas of Manchester that have been designated as Economic Revitalization Zones (ERZ) can apply for tax credits against the New Hampshire Business Profits Tax and/or the Business Enterprise Tax. Certification for this program is granted by the State of New Hampshire Department of Resources and Economic Development and extends for a 5 tax-year period.

“Currently Manchester has two large projects that will affect our commercial real estate market in 2010: the Pandora Building and the Northwest Business Park at Hackett Hill,” Wellington says.

The Pandora Building

The Pandora Building is located in Manchester’s historic mill yard and has been undergoing renovations for the past year. According to Wellington, the 144,000-square-foot building is located on more than 2 acres of land and was recently assessed for $1.6 million dollars but is expected to be worth in excess of $10 million once all the renovations and improvements are completed around April of this year.

The Northwest Business Park at Hackett Hill is situated on an 830-acre parcel of land, which the city purchased from the University of New Hampshire in 1998, Wellington says. “Approximately 400 acres were designated as a Nature Preserve and transferred to the Nature Conservancy. The remaining 426 acres are planned for development as a business park scheduled in two phases. The first phase includes subdividing approximately 123 acres into 12 lots, ranging from 2.83 acres to 26.28 acres. This is expected to generate more than 566,000 square feet of commercial space.”

He notes, “This project is viewed as one of the greatest potentials for economic growth in Manchester. The Northwest Business Park has the potential to bring in multiple large-scale industrial and commercial businesses which will expand our tax base and elevate the city’s reputation as the business capitol of New Hampshire.”

Select Greater Philadelphia is a not-for-profit organization funded by private contributions from 110 local companies. The organization markets 11 counties across southern New Jersey, southeastern Pennsylvania and the northernmost tip of Delaware.

As the economy has changed, Select Greater Philadelphia has focused on core industries that do well in the area. These industries include life sciences, biotechand medical devices as well as a range of emerging industries. Shannon notes that a recent Milken Institute study describes Greater Philadelphia as the best place to commercialize a new drug, and European companies choose to locate in the region because of the workforce. In fact, UK-based Shire Pharmaceuticals has grown its Philadelphia-based workforce to approximately 400 employees in approximately 4 years.

The area is also ideal for companies that specialize in alternative energy. The state legislatures provide a favorable climate, and the University of Delaware has been leading the research into alternative sources of energy long before it became popular, Shannon says.

Logistics are also a key for greater Philadelphia, which is located on the eastern seaboard between Boston and Atlanta. Many companies find Philadelphia a convenient place for East Coast operations.

Greater Philadelphia is also an advantageous location from a port standpoint. Mediterranean Shipping Company currently makes port calls in the area. Shannon and Evans expect more ship companies will make port calls in the next few years. The Panama Canal is undergoing a widening project, which is slated for completion in 2012. Also slated for completion in 2012 is a project to deepen the Delaware River. These two projects will make greater Philadelphia an even more logical choice as a logistics center.

In the meantime, Philadelphia also benefits from its location between Washington, D.C., and New York. According to Shannon, rates for New York office space have been lowered during the downturn, and Philadelphia’s office space has been priced down to maintain the competitive edge. In Washington, D.C., there is no shortage of office space because there are new jobs and some prices have even inched upward.

As Shannon notes, “Washington is only a 2-hour Amtrak ride (and it isn’t much longer to drive there). Companies that choose to locate in Philadelphia can conduct business in Washington without paying the Washington prices.”

“Overall, the city of Warwick continues to experience good commercial growth, despite an economy in crisis,” says Karen Jedson, director of the Warwick Department of Tourism Culture and Development in Warwick, Rhode Island.

She adds, “The Warwick Intermodal Train Station is one of the premier projects in the area and is expected to attract additional businesses to the area and additional growth for companies that already exist here.”

The Warwick Intermodal Train Station is on track for its projected completion date this fall. The facility will give the city of Warwick the closest air-rail link in the country and will provide Massachusetts Bay Transportation Authority (MBTA) commuter train service among Warwick, Providence and Boston, with service to Wickford Junction as well. A 1,200-foot, enclosed, elevated walkway, with moving sidewalks, is being constructed over Post Road and will connect T.F. Green Airport (PVD) to the station.

The intermodal facility – located near Interstates 95 and 295 – will include a bus hub, and a six-level parking garage that will house car rental companies and offer 2,600 parking spaces (1,800 for rental cars and 800 for rail commuters). The third, fourth and fifth levels will have “quick turnaround areas” with car wash bays, fueling and vacuuming stations for car rental companies.

The Rhode Island Airport Corporation (RIAC) estimates that the construction project alone will have infused $127 million annually into the local economy, including $43 million in construction wages. The project consists of four areas being constructed concurrently: terminal end improvements, construction of skywalk, customer service operations and garage and fueling platforms.

Jedson says, “Even before ground was broken, the project brought development to the surrounding area. A Hilton Garden Inn, completed several years ago, continues to do well. Its owner just opened the Ironworks Tavern, adjacent to the hotel and directly across from the station, in a historic foundry building. Another local developer is finalizing plans for a 540,000-square-foot, four-building campus next to the station. It will also include a parking garage and hotel.”

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